Prospective homebuyers shouldn't expect expect bidding wars to go away or prices to dip in 2021.
Home sales hit a fourth quarter high in 2020, and the shortage of houses for sale is near a 10-year high, too.
The result: Most buyers are paying over asking price for Phoenix-area properties.
A steady flow of new residents to metro Phoenix will continue to fuel all these trends this year, particularly since mortgage-interest rates are expected to remain near record lows.
Arizona was behind only Texas and Florida for population growth in 2020, according to U.S. Census estimates. California lost residents.
"Demand for homes is 31% above normal, and supply is 71% below normal," said senior housing analyst Tina Tamboer with the Cromford Report at a metro Phoenix HomeSmart Elite meeting last week.
"We can't even start discussing prices going down until supply and demand are back in balance."
Most buyers faced bidding wars on houses priced below $500,000 in 2020.
The exception was during March and April, the first few months of COVID-19 when prices and sales fell across the U.S. Then Phoenix-area buyers could get a few concessions from sellers, including closing costs.
But by mid-May, the housing market was quickly ramping back up and began setting monthly price records.
The Valley's median resale home price hit a record $193 per square foot in December, according to Cromford. That compares to $116 per square foot in January 2012, when the area's housing market was beginning to recover from the crash.
In December 2019, metro Phoenix's resale price per square foot was about $176.
Cromford breaks prices down by square foot to give a more detailed analysis of home prices by the size of the home. Mansions and very small houses can skew overall median prices higher and lower.
Last month, 33% of metro Phoenix home sales closed at costs higher than the asking price. The average increase over the listing price was about $5,000.
And the number of Phoenix area houses under contract to sell is already up 20% from last year's pace in January.
2020 was the second highest year for Phoenix-area home sales.
Last year's home sales pace is behind only the boom year of 2005, when short-term speculators using subprime loans with very small down payments were behind almost 40% of all sales.
When home prices started to fall during the Great Recession of 2007 and most of those investors walked away, the Valley's housing market crashed hard.
Tamboer said anyone looking for a repeat of the boom and bust will be let down in 2021.
Now, more than 80% of all metro Phoenix homes are being purchased by people who plan to live in them, not investors planning to flip fast. Also, most buyers are paying cash or using significant down payments and aren't likely to walk away from the homes.
Tamboer said any buyers hoping foreclosures will rise and prices will fall this year will be disappointed.
Also, she said any Phoenix area homeowners planning to sell, find a rental deal and then buy again at bargain prices in a year won't be happy with their decision, either.
That's because rents are at record highs too, and home prices haven't peaked.
Foreclosures are at near record lows in metro Phoenix because most homeowners are sitting on so much equity and can sell for profit or can get a relatively easy forbearance plan from their lender.
"It will be at least a year before prices could even flatten out in metro Phoenix," she said.
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